Credits and Debits: Understanding Practical Money Management

Credits and Debits: Understanding Practical Money Management

It’s commonly said and assumed that money makes the world go round. Without money, we wouldn’t be able to do many things we take for granted today, including buying or selling goods. It is very important to properly understand how money matters work and how to handle our personal finances.

Unfortunately, too many consumers today have never received much in the way of formal education about handling personal finance accounts. Without the proper knowledge, it’s easy to fall into risky financial habits, such as overspending and going into debt.

So we’ve compiled a directory of consumer finance resources, providing information about money and personal finances. By taking the time to learn about these issues early on, you can continue to practice good financial practices as an adult as well.

What is Money?

Although money is a physical item, it is more importantly symbolic.

Money came about in ancient civilizations. At first people would simply trade or barter one good for another. Over time, they saw that it was not very convenient to do so. For example, it might not be very convenient to trade a beautiful gold ring for twenty kilos of meat. Instead, people developed forms of money to symbolize the value of goods.

Today we don’t only use notes and coins, but we also use checks, credit cards, debit cards, online banking, and other online payment services as methods of paying for items.

Spending and Saving Money

There is a fine balance between spending and saving money. It is never nice to come to the realization that you have completely run out of money. To avoid this, make it a general rule to never spend more than you have and managing your debts. Furthermore, by saving a small portion of your earnings each time, you can use this amount as emergency money or to save up for something big.

Tracking your spending, earning and savings on a budget sheet is an excellent way to see where your money is going. You might realize that you have been spending most of your money on clothes when you really want to buy a video game!

Debit Cards: Pros and Cons

A debit card is a bit like a virtual wallet. Imagine that you have $100. You might choose to keep that amount in notes in your pocket, or you could deposit it in the bank. Now suppose you go to the music store and buy something for $5. If you pay for it by swiping your debit card, the bank removes $5 from your bank account and transfers it to the music store.

The good thing about a debit card is that it ensures that you only spend as much as you have, and no more. However, beware of extra fees that you might incur by withdrawing money from an ATM of another bank, or by withdrawing more money than you actually have!

Credit Cards: Pros and Cons

A credit card might be seen as the complete opposite of a debit card. It allows you pay for items with money that you do not have! Essentially, the bank gives you a loan but expects you to pay it back. For example, you might need to buy a new bike that costs $500. If you don’t have enough money, you might use a credit card to buy it. Keep in mind that it is not a free loan. The bank will charge you interest for each day that part of the loan is unpaid.

It is best to only use your credit card when you already have the money to pay off your purchases, or if you are fully certain that you can pay it off in regular installments. Interest is one of the biggest drawbacks of using a credit card. In the case of the bike, by using a credit card, the total cost might be $520 if you include the interest. However, credit cards are also convenient if you can keep the debt in check.

In FL, IN, KS, KY, LA, MI, MS, MT, NE, WA all installment loans are offered by Republic Bank & Trust Company, member FDIC. See the Rates & Terms page for details and availability in your state of residence. Loan subject to underwriting and approval. Such loans, or an interest therein, may be sold or transferred by the bank to third parties, including NetCredit Finance, LLC.

In AL, CA, DE, GA, ID, MO, ND, NM, SC, SD, UT, VA, WI, all other installment loans are made by a member of the NetCredit family of companies. CA residents: NC FINANCIAL SOLUTIONS OF CALIFORNIA, LLC d/b/a NetCredit is licensed by the Commissioner of Business Oversight (California Finance Lenders License No. 603K020). DE residents: NC FINANCIAL SOLUTIONS OF DELAWARE, LLC d/b/a NetCredit is licensed by the Delaware State Bank Commissioner, License No. 012553, expires Dec. 31, 2016 (pending renewal for 2017).